UBS to settle allegations over precious metals trading

Section:

Daniel Schäfer and James Shotter
Financial Times, London
Sunday, November 9, 2014

http://www.ft.com/intl/cms/s/0/428e1400-6804-11e4-bcd5-00144feabdc0.html

UBS is to settle allegations of misconduct at its precious metals trading business alongside a planned agreement between UK and US authorities and seven banks over accusations of foreign exchange market rigging.

The Swiss lender is one of a group of banks including Barclays, Citigroup, HSBC, JPMorgan, and Royal Bank of Scotland that are set to announce an agreement of at least L1.5 billion on Wednesday to settle forex rigging allegations with the UK's Financial Conduct Authority.

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Several US authorities are also expected to be part of the settlement, including the Office of the Comptroller of the Currency and the Commodity Futures Trading Commission in the US, while Switzerland's Finma may also take part. Bank of America Merrill Lynch is also expected to settle but only with US authorities.

UBS is expected to strike a settlement over alleged trader misbehaviour at its precious metals desks with at least one authority as part of a group deal over forex with multiple regulators this week, two people close to the situation said. They cautioned that the timing of a precious metals deal could still slip to a date after the forex agreement.

Regulators around the world have alleged that traders at a number of banks colluded and shared information about client orders to manipulate prices in the $5.3 trillion-a-day forex market.

UBS has previously disclosed that it launched an internal probe of its precious metals business in addition to its forex investigation. It declined to comment for this article.

Unlike at other banks, UBS's precious metals and forex businesses are closely integrated. The business units have joint management and the bank's precious metals staff -- who mainly trade gold and silver -- sit on the same floor as the forex traders.

One person familiar with UBS's internal probe said that the bank found a small number of potentially problematic incidents at its precious metals desk.

Andre Flotron, the head of UBS's gold desk in Zurich, has been on leave since January for reasons unspecified by the lender.

Mr Flotron has not been accused of wrongdoing and has never responded to any requests for comment. He has labelled his professional status on his LinkedIn profile as being "on leave, keen to return in due time."

The precious metals market has this year become the latest trading area to be subjected to heavy regulatory scrutiny and allegations of price rigging. The FCA fined Barclays L26 million in May after an options trader was found to have manipulated the London gold fix.

BaFin, Germany's financial regulator, has launched a formal investigation into the gold market and is probing Deutsche Bank, one of the former members of a tarnished gold-fix panel that will soon be replaced by an electronic fixing.

UBS's top management has pushed hard to speed up its internal forex and precious metals probes. It has sought to get ahead of rivals in securing immunity agreements as it wants to leave behind its legacy problems as soon as possible.

In a global forex-rigging probe against at least 15 banks, UBS has the highest numbers of suspended traders -- at least seven -- across London, New York, Singapore, and Zurich.

It is said to have fired several forex traders in recent months, some of whom had earlier been suspended.

UBS is also in separate talks over a forex settlement with the US Department of Justice's criminal division. It is expected to get leniency from the DoJ's antitrust team in return for handing over information early on and co-operating.

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